The question of affordability in the property market is a hot topic these days.
Office for National Statistics (ONS) data suggests that the average price of property in the UK stood at £273,762. This represents a 9.9% rise in a year, or £24,000.
In England, the cost of property rose by an average of 9.1 times earnings, which is an increase from the 7.9 level a year before.
The cost of detached property prices rose by 12.6%, flats increased by 5.1%, and new build house prices rose by a massive 25.4%.
There are concerns for the property market
Sarah Coles is a senior personal finance analyst at business consultancy Hargreaves Lansdown, and she has expressed concern as to what will happen next in the property market.
Sarah said; “House prices hit a record high in January, outstripping wages significantly yet again, and raising the risk of an affordability crisis. It’s forcing buyers to borrow increasing multiples of their salary, and risks making property unaffordable as interest rates rise. The most recent affordability figures cover 2021, so furlough pay makes them look more dramatic. However, with the average property costing 9.1 times the average salary, alarm bells will be ringing. Compare that to 1997 when properties cost just 3.5 times earnings.”
Sarah highlighted the impact that interest rate rises can have on the market. This is a pertinent issue at this time, with March seeing the third increase in a matter of months.
Sarah said; “While interest rates are at rock bottom, as long as lenders are still prepared to give them the cash, buyers will be happy to take it. Affordable monthly payments make borrowing hundreds of thousands of pounds feel manageable. However, with inflation hitting 6.2 per cent in February, and set to rise again, we can expect to see more rate hikes in the coming months.”
Will potential buyers decide that a home is too expensive for now?
Sarah Coles believes that as interest rates continue to rise, potential buyers will find the monthly cost of a mortgage to be off-putting. Buyers might find themselves stretched too thin, which isn’t outrageous when you consider the cost-of-living expenses these days.
Coles warns that as higher interest rates feed into the cost of new mortgages, buyers will find their monthly payments more off-putting. With prices rising on all sides, it could be enough to convince far more buyers that now is not the right time to be stretching their budgets so thinly.
Sarah Coles concluded by saying; “The lag in house price data, and the fact that in March we’re seeing figures for sales agreed some time between October and December last year, means we won’t see the impact of rising prices and rates take effect for a few months yet. In fact, we know from other indices that house prices powered ahead in February, and we know from HMRC figures that we saw a flurry of sales completing in February too, so it’s going to appear on the surface that we’re taking rate rises on the chin. It’s not until later in the summer that we’ll see the impact of houses rising further out of people’s reach.”
We know these are changing times in the housing market, and if you would like any support, please get in touch, and we will be more than happy to assist you.
Contact Stones Residential for all your Belsize Park property needs in 2022
If you would like to arrange an appointment to help you negotiate the local housing market, please contact Stones Residential today by calling us on 020 7483 0685 or emailing belsizepark@stonesresidential.co.uk.
